The National Treasury recently published the 2025 Sovereign Wealth Fund (SWF) Bill, sparking considerable discussion among financial and governance analysts. The fund is expected to comprise three main components: stabilisation, strategic infrastructure investment, and the Future Generations Fund (Urithi).

While the implications, opportunities, and challenges have been debated on this platform, the 2027 general elections are approaching, and the campaign season is steadily gaining momentum. It is important to consider whether this development is a strategic fiscal intervention that could secure Kenya’s future, akin to Singapore’s Temasek, or whether, despite being well-intentioned (by some quarters), it could open a Pandora’s box, leaving Kenya vulnerable to political pressures.

Overall, it is worth noting that the challenges highlighted in this article are often expected and hard to avoid. This is because SWFs are state-owned entities, and political incentives are inherently short-term.

In a paper, Chelsea Markowitz (an economist and researcher at the South African Institute of International Affairs (SAIIA)) analysed the political economies of four African countries in relation to their sovereign wealth funds. The paper,  titled “Sovereign Wealth Funds in Africa: Taking Stock and Looking Forward”, offers actionable insights for Kenya.

Fiscal Culture versus Fund Rules

Chelsea posts that, whereas clear, focused sovereign wealth fund (SWF) rules can promote transparency and efficiency, they often struggle in countries without strong fiscal discipline. Without high-level commitment, funds may be designed with weak rules or small mandates.

In Ghana, for example, the government borrowed heavily at high interest rates while its well-regulated Petroleum Funds invested conservatively. The rules-based fund was overshadowed by broader fiscal indiscipline.

Botswana’s Pula Fund, in contrast, has no strict withdrawal rules. The government can use it to cover budget gaps, such as salaries and pensions. Yet, spending has remained sustainable, and the fund has helped stabilise the budget and lower the country’s risk. This success seems less about fund design and more about Botswana’s broader conservative fiscal culture. The fund functions as a symbol that reinforces domestic and international confidence within an already disciplined system.

While a strict, rules-based fund on paper may certainly make corruption more difficult, funds will often be deliberately created with loose rules, or politicians will find ways to work around existing ones.

Sovereign Wealth Funds as Political Tools

Secondly, sovereign wealth funds are often used as political tools, and managing public and political expectations is crucial. In Botswana, the Pula Fund was framed as a long-term savings mechanism rather than a source of immediate spending, which helped sustain commitment to fiscal rules. In contrast, Ghana’s strong legal framework for resource governance was undermined by poorly managed expectations, leading to pressure to spend oil revenues for short-term political gain.

Conclusion 

Before implementing a sovereign wealth fund, it is essential to assess whether it is the most appropriate tool to address the country’s challenges. In Kenya’s case, this involves weighing the bill’s objectives against potential pitfalls, conducting a SWOT analysis of political and economic forces that could affect savings and spending, and identifying which risks can be mitigated. 

Equally important is building broad political support by forming coalitions of stakeholders, such as opposition parties, private sector actors, labour unions, and international bodies, and involving them in governance and accountability. Clear public communication on the fund’s goals, limitations, and risks is also key, alongside soliciting input to foster ownership.

This begs the question: Is Kenya’s political economy ready for a sovereign wealth fund?